Facet Wealth recently passed $1 billion in assets under management, or AUM, a common industry metric to measure a financial planning firm’s growth and size. For many in the industry, this is a significant milestone.
“It’s the 'wrong metric,'” said Shruti Joshi, Facet Wealth’s Chief Operating Officer, “because it’s ‘advisor-centric.’” The reason: it creates an exclusionary standard in the industry, she said, where “you must have investable assets in order to get advice.” In addition, most financial planning firms charge clients based on their assets, with 1% of their investable assets being a common measure. A client with $1 million to invest, for example, would pay the financial planning firm $10,000 per year. If the value of the investments increase so does the fee, even if the planner is still providing the exact same services.
Facet Wealth, by contrast, doesn’t charge its clients a percentage of AUM. We charge a flat fee based on each client’s needs. When clients make more money they don’t pay more unless their needs change.
“We think it’s more important to look at how we’ve been a part of our clients improving their lives,” Shruti said. “How much debt have they paid off? How many of them are enjoying a comfortable retirement? How many of their children will graduate from college without student loan debt? How have they improved the insurance coverage that protects their families? Those are the metrics that matter.”